Garber Corporation had 40,000 shares of $10 par common stock outstanding on January 1, Year 1. On June 1, Year 1 Garber purchased 5,000 shares of its own stock on the open market for $22 per share and held it as treasury stock. On October 1, Year 1 Garber declared and issued a 10% stock dividend. The market value of Garber's stock was $24 per share on October 1. Garber's board of directors declared and paid a cash dividend of $57,750 on December 15, Year 1.Required:a) Show how the purchase of the treasury stock affects the financial statements. AssetsLiabilitiesEquityRevenuesExpensesNet IncomeCashFlow???????b) Show how the issuance of the stock dividend affects each element of the financial statements. AssetsLiabilitiesEquityRevenuesExpensesNet
IncomeCashFlow???????c) Show how the declaration and payment of the cash dividend affect the financial statements.AssetsLiabilitiesEquityRevenuesExpensesNet IncomeCashFlow???????d) What was the per-share cash dividend paid on December 15?
What will be an ideal response?
a)
| Assets | Liabilities | Equity | Revenues | Expenses | Net Income | Cash Flow |
| (110,000) | NA | (110,000) | NA | NA | NA | (110,000) FA |
| Assets | Liabilities | Equity | Revenues | Expenses | Net Income | Cash Flow |
| NA | NA | (84,000) 84,000 | NA | NA | NA | NA |
| Assets | Liabilities | Equity | Revenues | Expenses | Net Income | Cash Flow |
| (57,750) | NA | (57,750) | NA | NA | NA | (57,750) FA |
Feedback:
a) 5,000 shares × $22 per share = $110,000 decrease in cash and increase in treasury stock
b) (40,000 shares - 5,000 shares) × 10% = 3,500 shares issued in stock dividend
3,500 shares issued in stock dividend × $24 per share market value = $84,000 decrease in retained earnings
3,500 shares issued in stock dividend × $10 par value per share = $35,000 increase in common stock
3,500 shares issued in stock dividend × ($24 per share market value - $10 par value per share) = $49,000 increase in additional paid-in capital in excess of par value - common
d) 40,000 shares - 5,000 shares of treasury stock + 3,500 shares issued in stock dividend = 38,500 shares; $57,750 dividend ÷ 38,500 shares = $1.50 cash dividend per share
You might also like to view...
All except one of the following accounts will be increased with a debit:
A) Unearned Revenues B) Land C) Accounts Receivable D) Cash
Why is a full SWOT analysis not essential when using a competitive comparison framework to
compare a company's principal competitors? A) The opportunities and threats are similar for principal competitors. B) The competition between principal rivals is based on equality of strengths but not weaknesses. C) Most principal competitors are well established in a market. D) The market leaders have obvious superiority in most areas.
An airline company tracks the number of lost bags that occur each day. This is best monitored by which of the following control charts?
A) x-bar chart B) R-chart C) p-chart D) c-chart E) None of the above
When a buyer breaches a contract, the risk of loss remains with the seller
Indicate whether the statement is true or false